The National Conference of CPA Practitioners has issued a call to action criticizing the Internal Revenue Service’s recent guidance around the Employee Retention Credit.
Specifically, NCCPAP pointed out that, under the guidance in
The original rules of the ERC did not allow a credit for wages paid to family members.
“Not having an allowance for those long-time family member employees and children was already a difficult pill for a small-business owner to swallow,” NCCPAP said today in
They note, though, that the new guidance takes a “letter of the law” approach that excludes the owner and their spouse’s wages if they have any “close living relatives,” regardless of whether they work for the company or not.
“It does not have to be a relative you employ; the existence of any living relative disqualifies a small-business owner and their spouse from claiming an ERC on their earnings,” they wrote. “You read that correctly!”
“It should be noted that the consequences of Notice 2021-49 to a small business, that employs the owner and their spouse, can cause a loss of up to $66,000 from combined credits for 2020 and 2021,” the letter continues. “These funds may make the difference between closing the doors or enabling those businesses to remain open and continue employing their staff for years to come. The loss of these funds could destroy an already struggling small business at a time when our economy is trying to mount a recovery.”
The letter calls on tax and accounting profession to alert their representatives in Washington, D.C., to the current IRS interpretation, which can only be fixed by congressional action.
